Digital Transformation and Green Total Factor Productivity in China

ABSTRACT Achieving sustainable development relies on the continuous improvement of green total factor productivity (GTFP). Although existing studies have documented a positive association between digital transformation and GTFP through technological innovation, the underlying mechanism remains insufficiently understood because technological innovation is often treated as an aggregate channel. Such aggregate treatments are ineffective in clarifying the underlying mechanisms of action within it and carrying out targeted policy. In this paper, we open this black box by dividing the technology innovation caused by digitization into indigenous R&D efficiency improvement and technology spillovers increase. Through a dataset covering China's A‐share listed enterprises over the period 2012–2021, together with the Global Malmquist‐Luenberger index based on a super‐efficiency Slacks‐Based Measure model and econometric analysis, we show that digitization significantly enhances GTFP. More importantly, the increases in both indigenous R&D efficiency and technology spillovers coming from digital transformation are two important channels to promote GTFP. Our study offers insights for emerging economies aiming to achieve green growth through digital reforms.